Lights, Camera, Tax Break

Kitzhaber greenlights bigger tax subsidies for moviemakers.

Even as Gov. John Kitzhaber is slashing Oregon’s budget,
he’s pushing for a big expansion to a tax credit for movie production in
the state.

On Feb. 7,
Kitzhaber’s proposed cuts of nearly $3.5 billion in current service
levels in the next two years landed him on page 1 of The Wall Street Journal, in a story titled “Governors Chop Spending.”

But
last week, the Democratic governor also introduced legislation that
would jack up the tax revenue the state funnels back to moviemakers from
$7.5 million a year to $12.5 million. (The film credit began in 2003
and will expire this year if lawmakers do not vote to extend it.)

The $12.5 million is
pocket lint compared with the state’s annual budget of about $7.4
billion. But the proposed expansion of the film tax credit rankles
critics who say it’s an extension of an inefficient program that rewards
the wealthiest Oregonians on the basis of some fairly thin evidence
that it creates jobs.

“This scheme is
merely enriching some very well-to-do people, and it is very
inefficient,” says Chuck Sheketoff, director of the Oregon Center for
Public Policy.

The program works
like this: Taxpayers who want to offset their Oregon tax liabilities buy
credits from the Governor’s Film & Television Office. That office
then doles out the money to companies that produce such work as the TV show Leverage and that can document certain expenses in Oregon.

Sheketoff, a longtime
critic of tax subsidies, says the state’s approach of selling the film
tax credits at a discount of 90 cents to 95 cents on the dollar is a
waste of money and an indirect—and therefore less scrutinized—way of
spending scarce tax dollars.

“If you want to fund subsidies, it ought to be done as a direct expenditure,” says Sheketoff.

Sheketoff says if the
program is worthwhile, it would be better to write a check from the
state treasury to production companies rather than discounting the
credits. That also would make the program compete with other general
fund expenditures.

More than 40 states
offer some level of subsidy for film production. And Oregon’s program,
which is capped at 20 percent of production costs, is less generous than
many.

But when the state is
preparing to slash school days, eliminate medical care for some
low-income Oregonians and cut multiple other services, it’s worth asking
why the state is underwriting moviemakers’ expenses.

Vince Porter of the
Governor’s Film & Television Office says the program attracts
production companies to Oregon, which translates into thousands of jobs,
lots of tax revenues and lots of income for service providers, such as
equipment rental companies and hotels. Porter says production companies
have spent nearly $180 million in Oregon since 2007.

But Paul Warner, the
state’s legislative revenue officer, says Porter and fans of the credit
may be reaching an unwarranted conclusion.

Yes, the state is
forking over subsidies to filmmakers and the filmmakers are hiring lots
of Oregonians. It’s unclear, however, whether the subsidies are creating
the jobs or the link is merely coincidental.

Kitzhaber’s
spokesman, Tim Raphael, says the tax credit has every appearance of a
job creator, something Oregon badly needs. He says the current format is
efficient and maintaining it as a multilayer credit rather than direct
expenditure “offers certainty over a longer period.”

FACT:In 2007, Laika, the Portland
film production studio owned by Nike founder Phil Knight, got $250,000
from the Governor’s Film & Television Office. Most of the other
production companies that have benefitted are from out of state. To see
the entire list of beneficiaries, go to wweek.com.

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